EOG seen extending gain as CEO leaving fuels deal talk

EOG Resources Inc., the U.S. crude oil producer that’s rallied more than any peer in the past six months, offers the biggest energy companies the chance to expand in one of the world’s fastest-growing markets.

Even after surging 32 percent since July, EOG trades at a below-average multiple of enterprise value to both production and profit, according to data compiled by Bloomberg. With Chief Executive Officer Mark Papa retiring in June, a takeover of the $34 billion company is more likely, Royal Bank of Canada said.

EOG has exceeded analysts’ earnings projections for eight straight quarters, and in November forecast 2012 production growth of 10.6 percent, almost double the rate it estimated in February. The company has some of the best acreage in North America’s two top shale formations, the Bakken and Eagle Ford, according to Miller Tabak & Co., which said Chevron Corp. is the most likely suitor, given that its cash equals 64 percent of Houston-based EOG’s market capitalization. Stewart Capital Advisors LLC said Statoil ASA also has the leeway to make a deal.

"It’s certainly an attractive target from the perspective of a super-high-quality asset base in all the right plays in the U.S.," Leo Mariani, an Austin, Texas-based analyst at RBC, said.

EOG is among U.S. producers that transformed the energy market during the past decade with hydraulic fracturing, which uses injections of water, chemicals and sand to extract oil and gas.